Severn Trent voices concerns about Ofwat price controls

Utilities giant Severn Trent has voiced concerns with Ofwat's proposed water price controls in response to a statement by the regulator this week which welcomed 'constructive' criticism.

Industry regulator Ofwat released a statement on Tuesday evening that sought to clarify some licence modification proposals following requests for more information from shareholders.

The regulator began by saying: "The challenges facing the sectors means there is a need for new, innovative ways to deliver sustainable water. Flexibility is needed in the licence since it is one of the key tools of regulation so that we, as regulator, can adapt to changing circumstances."

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Ofwat said that this flexibility would allow it to set segmental price controls and targeted incentives.

However, the regulator did welcome "constructive" responses if they have concerns with the proposals. If some companies don't accept the proposals, then the matter will be referred to the Competition Commission (CC).

Severn Trent said on Friday morning: "Whilst Severn Trent Water is minded to accept Ofwat's proposed change to its licence, the company believes it would be better if the current proposals were modified," the company said.

The company said it had made "constructive suggestions to overcome concerns" about the prospect of losing 40% of revenue from wholesale price controls and the lack of clarity about how future prices would be controlled.

"The company believes that these suggested changes would still give Ofwat the flexibility required to drive the significant reform of the industry which Severn Trent continues to be supportive of."